BOE FPC: Makes Case For Raising Capital Buffers; Eyes On June>

-BOE FPC: Spreads Narrow On High LTV Mortgages; Below Pre-Crisis Levels

     By David Robinson

     LONDON (MNI) - The Bank of England Financial Policy Committee 

debated the case for raising the countercyclical capital buffer (CCyB) 

at its 12 March meeting, with arguments over whether to tighten 

immediately or wait until June, the minutes revealed. 

     Raising the CCyB would be de facto tightening of policy, aiming to 

strengthen bank capital in relatively benign times to protect against 

risks ahead. The CCyB is currently at 1% but the minutes said that 

arguments were advanced for raising it immediately. 

     The minutes said that financial stability risks had increased since 

the CCyB was set at 1% and that policy should be forward looking. 

     "Waiting for a more marked evolution in domestic risks before 

acting could result in a need to consider sharper adjustments to the UK 

CCyB rate, which would likely carry larger economic costs," the minutes 

said. 

     In the end the FPC delayed raising the CCyB and said that risks in 

specific areas could be tackled through more targeted action and there 

were benefits in waiting and seeing how things evolved in coming months. 

     It stated it would review the level of the CCyB in June. 

     On mortgages the FPC noted that there had been a gradual loosening 

in credit and that there had been a tightening in spreads between the 

high loan-to-value (LTV) and lower LTV mortgages. The spread between 90% 

LTV and 75% LTV mortgages had narrowed 34 basis points since the start 

of 2016. 

     The FPC noted, however, that the volume of very high LTV ratio 

mortgages remained below pre-crisis levels with relatively weak 

aggregate demand for mortgages. 

     [TOPICS: M$$BE$]